The big three instant messaging providers will start chatting with each
other, sort of.

In a deal that breathes new life into the struggling business instant
messaging space and raises hopes for full IM interoperability, Microsoft
announced it would open its enterprise-focused Live
Communications Server 2005 (LCS 2005) to chat networks run by rivals America
Online and Yahoo .

It is a strong signal from Microsoft that there is money to be made in
the enterprise IM market, even as AOL and Yahoo have retreated
from the space. Yahoo recently dropped its Business Messenger IM Service
to focus on its free, consumer-focused IM service, while America Online's
plans to stop selling its AIM Enterprise Gateway.

Microsoft's LCS 2005, currently in beta, provides a standards-based IM
platform and real-time collaboration platform specially for businesses. The
software giant will pay Yahoo and AOL for access to hundreds of millions of
their public IM consumers and resell that access to businesses running LCS
2005.

The connectivity service will be sold as add-on modules within the LCS
2005 product. Pricing and licensing options are expected to be announced in
the fourth quarter this year, when the final version of LCS 2005 is
released.

While the deal is a win-win for Microsoft, AOL and Yahoo, smaller
connectivity players like FaceTime and IMLogic will definitely feel the
squeeze. FaceTime and IMLogic hawk network-independent applications that
allow real-time communication on any enterprise, private or public IM
network.

"This IM connectivity arrangement reflects a shared vision for the
potential impact of enterprise IM (EIM) as a productivity tool and platform
for the delivery of value-added business services. This combination is the
next step in making EIM as widespread and beneficial as e-mail," Microsoft
said in a statement announcing the deal.

According to Microsoft Vice President Anoop Gupta, connectivity with all the major
public IM networks was the "number one request" from enterprise customers
testing the LCS 2005 platform.

AOL Vice President of Desktop Messaging Ed Fish said the company would provide
routing and network services within LCS 2005, opening the door for
businesses to access its tens of millions of home and workplace users.

"This agreement represents the dawn of the next era for instant messaging,
which will unleash the true potential of real-time communication and
collaboration in the workplace," Fish said.

Still, the deal falls short of providing full IM interoperability for
consumers using the three big services. For years, AOL has side-stepped pressure
to open its text-chatting network to rivals. But that
stance has softened
a bit after AOL and Microsoft inked a $750
million deal to put an end to the browser war.

After that agreement, AOL said it would "explore ways" to interoperate with
Microsoft's IM service but made it clear that compatibility would come about
only in a way that would "protect consumer privacy, security and network
performance."